The frenzy in financial markets over a potential April jobs report of nearly one million new jobs will occupy the news cycle this week. Astute market watchers point out that wages will be important to watch as well. That is, it’s important to be mindful of the math. Higher wages over the last year had to be paired with the bulk loss of jobs in low wage, largely female and minority dominated job sectors. The reverse is happening now as the economy begins to re-open and lower wage rehires pull down the averages. Good. Yet there are still more than eight million fewer people employed in the U.S. than just before the pandemic.
We repeatedly hear the complaint that employers cannot find workers to hire. What gives? First, we have 600,000 fewer people in the U.S. than at the beginning of the pandemic. While many of those that died were older, not all deaths were among the elderly. Low income, minority service workers suffered heavily. (CDC publishes some interesting charts here.) Second, not all school systems are fully (safely) open and child care is expensive. Many parents (teachers and administrators) are reluctant to return to work until they are confident that their kids are safe and their workplaces are safe as well. Granny may no longer be around to help single parents take care of their kids. Of course, there are some that “prefer” to collect unemployment insurance rather than go back to work, but that’s way too simplistic an analysis.
Employers became sanguine while the “Phillips curve” seemed to be out of commission. (Simply put, low supply and high demand for workers puts pressure on wages.) It’s back but in a different form. Paying more to hire and retain workers at the lowest income levels has not been the norm but it is beginning to emerge. Amazon, Walmart, Costco have begun to increase wages. Have poultry processing plants, where the COVID outbreaks were severe and early in the pandemic, also raised wages and retooled their plants for safety as well?
Dramatic changes in the composition of employment were lifting wages for Black males and notably, Black females before the pandemic hit. How long will it take to return to that trend line? Plus, devastating viruses are here to stay and it will take some time for society to adjust to ongoing vaccinations and safety measures that we will be living with. Consider rising cases in Japan, Southeast Asia and the tragedy in India. The World Health Organization has a tracker here.
The global supply chain morass cannot be divorced from these factors. The extreme cold spell that shut down Texas adds climate events to the list. Return of plastics manufacture, repair of damaged utility systems will take time. (Weather forecasters expect an active east coast and gulf coast hurricane season this summer and fall.) Outsourced technology services to India and elsewhere inevitably slow down production.
Once-upon-a-time, companies paid employees some of their relocation costs in tight labor markets. Employers, too, supported on-the-job training and in some hot sectors paid “sign-on” bonuses to pry employees away from their current jobs. We are happy that Federal Reserve Powell acknowledges the outsized harm the pandemic imposed on female workers and workers of color and has factored this into his analysis. The economic surge in re-opening does not necessarily preview long-term inflation. If the pandemic taught us anything, we learned how dependent we are on “frontline” workers – not just nurses, but grocery clerks and delivery services in order to survive and maintain lifestyle in the lockdown economy.
So yes, recovery will cost more, whether this comes from companies paying up to attract well-trained, stable employees or with government financed workforce development programs paid through higher taxes. Yes, this may push up inflation from its very low level. It means making sure schools are re-tooled and well-stocked, affordable housing is located near transport to jobs. Dare we add that our employer-based healthcare system has made life difficult for many in a high unemployment economy? Routine healthcare, however paid, (and whatever your income level) has been pushed aside in order to deal with the emergency needs of COVID.
Stimulus is just that (stimulus), and we are happy for the lift the economy will likely see over the next few months. But investment in training, safe places to work, mobility systems to get there, schools, healthcare systems, quality child care and strong infrastructure that can handle extreme weather are the ingredients that will support sustained, long term growth in productivity.
